Alternative to the welfare state: A new lifestyle in the offing?

So far it has been akin to kite flying or amounted to loud thinking among a few but the idea seems to be gaining ground at the level of think tanks, if not with policy makers yet. It is not likely to overtake like a tidal wave in countries where it is being debated but the distant rumblings can be heard like an inchoate build-up of a possible sea-change. Possible, not yet probable according to sceptics but even that remote prospect makes one sit up and take the new idea into cognizance.
The name of the new candidate claiming for adoption as a major policy change in economic governance is innocuous, even endearing one - universal basic income. It has an egalitarian ring and that is the cause of its drawing adherents among those frustrated, even made angry by growing inequality. It is being touted as the timely response to runaway populism in the West. According to those given to tinkering with new policy options the idea is not new really, it has been kicking around in left-wing circles for quite some time - a quarter century by some accounts. It is now poised to go to mainstream claiming to be a viable alternative to the welfare state. The universal basic income (UBI) has already become a pilot programme in a few countries where it is being tested for its practicality and acceptability.
Populism led to Brexit in the UK and threw up an unlikely candidate like Donald Trump to lead the most powerful country in the world. The groundswell of right-wing populism could give France Marine Le Pen and Orban in Netherlands the mantle of power with the Alternative Party in Germany making steady inroads among the electorate. The basic manifesto of populism in these countries embodies staving off immigrants and generating employment through an arcane mix of fiscal measures and beggar-thy-neighbour trade policy. Bringing back jobs from foreign countries reversing the process of globalisation has become a mantra and promise of the leaders riding the crest of populist wave.
Donald Trump promised to bring jobs back from countries that, according to him, had 'stolen' them with the help of sweatshops like industries or through unfair terms in trade agreements that were skewed against America. The North American Free Trade Agreement (NAFTA), for example, has allegedly benefited Mexico more at the cost of American workers. Not to be left behind in this popular parlour game during the presidential campaign, Hillary Clinton promised a full employment economy where everybody had enough to raise a family and live in dignity. Neither of them mentioned the elephant in the room, automation that was gobbling up jobs in industries rendering workers redundant. Nor did they berate the stratospheric salary, allowances and mouthwatering bonuses sequestered by top echelon executives in banks and financial institutions of Wall Street. Hillary Clinton had no qualms in taking hefty fees for speeches made at one of the behemoth habitué of the financial district, Goldman Sachs, that was made much of by her rival during the one-to-one debates. Ranting against the rapacity of Wall Street did not prevent Donald Trump from maintaining cozy relations with some of the powerful denizens of the fabled street. After winning the election he did not feel squeamish about appointing some of them to his cabinet.
According to available data, thousands of automatic teller machines (ATM) have replaced hundreds of thousands of human bank tellers. Reliable sources put 7.0 million jobs in America that have been eliminated in the past 35 years by automation, while factory production has actually doubled. And the self-driving cars that are about to hit the road will destroy most of the 4.5 million driving jobs in the USA. Meanwhile, Uber, the online taxi service, has already thrown thousands of taxi drivers into unemployment in America and Britain almost overnight. It is the anger of millions of people who became victims of new technology in the digital world that broke the normal voting pattern and gave White House to Donald Trump, an outlier in the political arena. But the popular anger was misplaced, loss of jobs was not due to free trade and globalisation as was being alleged by the brash contender to the American presidency. The villain of the piece was the robotic machine outcompeting men on the assembly line. Donald Trump either did not realise this or preferred to play on the fear factor among the unemployed and stoke up xenophobic feelings of the easily gullible. As automation continues its march like juggernaut, the anger can only be expected to grow and spread among the populist public oblivious of the main causes of their misery. Keeping pace with this trend and further stoking the fire with lies and half-baked truth the leaders cashing in on populism expect to keep the momentum of popular anger to implement their agenda. The root cause for the malaise is not likely to be addressed in this power politics.
Automation will continue to spread into newer sectors at an exponential rate in the near future. The estimated impact over the next 25 years includes the loss of 47 per cent of all existing jobs in America, 57 per cent in Europe and even China will not be spared, losing 77 per cent of manufacturing jobs, according to an estimate. These are whopping figures which translated into human livelihood on daily basis could mean nothing short of a social catastrophe. That could mean a lot more anger among the losers, a growing army of populists. These would conceivably precipitate the collapse of democracy as it has been known so far. The dystopian reality is now slowly dawning on the CEOs and owners of major enterprises that if half of the population suffer long-term unemployment they will not be able to buy the goods and services that the free market produces. That would lead to the collapse of the capitalist business model. Enters UBI, universal basic income, drawing their nervous attention. Can it be the saviour? they have started to wonder. Not a few in the corridor of power is paying attention, too. It seems to be an idea whose day has come.
The principle of UBI is that every citizen will get a basic income from the state that allows him to maintain a decent standard of living whether they are employed or not. They may also work, if they like, in order to earn additional income but that income outside of UBI would be taxed to prevent inequality. Thus, UBI has been conceived to have capitalism at its moment of existential crisis. Sceptics ask, why pay UBI rather than unemployment benefit to the unemployed as has the practice been so long? The answer given is, firstly, the continuation of the welfare system has become unbearable and secondly, payment of unemployment benefit entails humiliation while accentuating social division and unrest. If everybody gets UBI, egalitarian principle will be at work, assuaging the grievances of the poor.
The sixty-four thousand dollar (the expression has ignored inflation to retain the original flavour) question is: where would the money to finance UBI come from? The proponents have pointed out that half of the fund will come from ending all existing government social welfare payments, including national health services. The assumption is that if one gets UBI, one will not need unemployment benefit or old age pension. Heavy taxes on financial institutions and automated factories will rake in substantial fund, it is pointed out.
The trickiest question is: how many people would still choose to work even when UBI becomes universal? By a rule of thumb, if 47 per cent of today's remaining jobs are taken over by automated machines in 20 years' time, then 53 per cent of today's jobs would still need people. Might some of them drop out, relying on UBI and opting for job-free living? Finding the answer to that will determine the total liability of the state and the potential income from taxes. If recipients of UBI save for the future when in old age expenses will rise and UBI, even when inflation adjusted, may not be enough to compensate, the fall in consumer spending will hurt the economy. Then, there is the question of providing social services like education and health care. Payment of UBI will absolve the state from providing these and the private sector will take over this role of the state but against payment. Then the question arises: will the pricing of the services be commensurate with the income from UBI or will the private sector provider of these services follow their own estimate of cost and profit? If the answer is latter, will there be a mismatch between availability of fund under UBI and the liability to pay to the private sector providers? These are the 'unknown unknown' at the moment. Finding the answer to these questions is important before embracing the new idea. Pilot programmes are under way in a few countries to test-run the model. Ontario in Canada, Utrecht in the Netherlands and Norway have already started pilot projects to find out the advantages and disadvantages of introducing the UBI. Scotland and Italy are seriously considering to join the experiment. Dismissed when first broached, the idea of UBI is now drawing serious attention from policy makers in a number of countries. If ultimately introduced, it will be the most spectacular arrangement to manage society and run the economy ever made by any government. But with so much leisure made available by income without having to work will life be enriched with a sense of fulfillment?  Will people be able to handle the new life without any psychological fallout? One can only wait and see until the results of the pilot programmes are known. Whoever thought of UBI, it is unquestionably a great challenge for governance. It can also offer an attractive opportunity to those who feel marginalised by the present system.                                                 
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